The company released its 2023 annual report

In 2023, the company's revenue was 368 million yuan, -13.84% year-on-year; net profit to mother was 80 million yuan, -19.15% year-on-year, and net profit without return to mother was 73 million yuan, -15.41% year-on-year. Among them, 23Q4 revenue was 100 million yuan, +19.15% YoY, +12.22% month-on-month; net profit to mother was 0.21 million yuan, +6.18% YoY, -1.70% month-on-month, net profit not attributable to mother was 0.19 million yuan, +2.91% YoY and -6.61% month-on-month.

Consumer electronics dragged down the performance of atomized alloys, and soft magnetic and metal feed revenue increased at the same time? Atomized alloy powder: The annual revenue of atomized alloy powder series products in '23 was 41 million, -69.83% year-on-year, mainly affected by the decline in the average price of the product. In '23, product sales were 683 tons, -5.65% YoY, and the average product price was -68.03% YoY. Due to the decline in terminal demand and changes in the shipping structure of atomized alloys in the consumer electronics market, the procurement of atomized alloy powder by related customers changed from high-end and high-priced cobalt-chromium series powders to iron-based series powders, so the decline in average product prices dragged down revenue.

Carbonyl iron powder: The annual revenue of carbonyl iron powder series products in '23 was 115 million, -4.29% year over year, and sales of products in '23 were 2651.07 tons, -9.75% year over year.

Metal injection molding feed: The annual revenue of the metal injection molding feed series products in '23 was 55 million, +64.55% year-on-year, and annual product sales in '23 were 895.68 tons, +48.29% year-on-year.

The company's metal injection molding feed products have good performance. Some 3C product terminal manufacturers recommend suppliers to prioritize procurement of the company's products, further expanding the sales scale of the company's injection-molded feed.

Soft magnetic powder: The annual revenue of soft magnetic powder series products in '23 was 128 million, +8.05% year on year. In '23, product sales were 2496.78 tons, +5.01% year over year.

Overseas markets+product structure optimization, gross margin improved the company's overall gross profit margin by 39.07% year-on-year, and +4.94pct year-on-year. The company continues to gain strength in the global market, and has achieved positive results in optimizing the product structure and expanding overseas markets. Among them, the gross profit margin of atomized alloy powder was 16.87%, -3.37pct; the gross profit margin of carbonyl iron powder was 49.67%, +2.95pct year on year; and the gross profit margin of soft magnetic powder was 47.43%, +3.92pct year on year. The gross profit margin of metal injection molding feed was 22.27%, +2.46pct year-on-year.

Actively promote project construction and focus on the release of new product capacity

Carbonyl iron powder: The original production capacity of the company's carbonyl iron powder products is about 5,000 tons/year. The fund-raising project with an annual output of 6,000 tons of carbonyl iron powder and other series of products (phase I) was completed in October 2023. After the trial production review is approved, a certain amount of additional production capacity can be released, which is scheduled to be released over three years.

Ningxia's “100,000 tons/year metal soft magnetic micro-nano powder project” has fully achieved the expected increase in production capacity of 100,000 tons after delivery, and is expected to release 3,000 tons in 2025.

Atomized alloy powder: The current production capacity is about 1,000 tons/year, and the atomized alloy powder fund-raising project can increase by 4,000 tons/year after completion.

Cash dividends to give back to shareholders

The company plans to distribute a cash dividend of RMB 6.00 (tax included) to all shareholders, and is expected to distribute a cash dividend of RMB 51 million (tax included), with a dividend payment rate of 64.29%. At the same time, the company plans to transfer 4 shares for every 10 shares of the capital reserve to all shareholders without bonus shares.

Investment advice:

The expected revenue for 2024-2026 is 4.69, 5.78, and 1,039 million yuan, respectively, and net profit of 1.23, 1.61, and 297 million yuan, corresponding EPS is 1.43, 1.88, and 3.47 yuan/share, respectively. Currently, the corresponding PE price is 23.4, 17.8, and 9.7 times, maintaining a “holding-A” rating. Considering the increase in performance brought about by future cost reduction in Ningxia and the commissioning of the new line, it is expected to be released in 2025. The 12-month target price will be adjusted to 52.6 yuan/share, corresponding to 25-28 Double PE.

Risk warning: demand falls short of expectations, raw material prices fluctuate greatly, and project progress falls short of expectations